Logic has taken a 180-degree turn, running at full sprint in the opposite direction from where it should be.
As one small example, consider the good fortune of Hans Peter Christensen, recently profiled in The Wall Street Journal, who is currently being paid by his bank to borrow money. Christensen owns a home in Aalborg, Denmark, where negative interest rates resulted in his bank paying him the equivalent of $38 in interest for the quarter for borrowing money.
Meanwhile, in other countries with negative interest rates, some banks are charging customers for their deposits. So the bank pays you to take its money and charges you to take your money. 
Such is the logic of today’s central bankers in much of Europe and Japan, where rates have been negative for more than a year.
The United States has not adopted negative interest rates—but Fed Chair Janet Yellen said in February that the Fed is studying the feasibility of doing so, “to give the economy an extra boost,” according to The Wall Street Journal.
Maybe central bankers figure that, because the economy was frayed and broken back in 2007, if everyone did the reverse of what they were doing then, the economy would boom.
But they didn’t reverse the regulatory overload that has only accelerated since then. They didn’t reverse the broken system that over-taxes those that contribute to economic growth, and under-taxes those that are well connected or call themselves “green.” They didn’t reverse the growth in government control of healthcare, financial services, environmental everything and even the Internet.
Rather than repair the cracked logic of quantitative easing, world leaders have been complicit in widening the crack. Capitalism and freedom are being threatened around the world, as growing government increasingly trumps freedom.
Yet the next president of the United States may go even further, bringing us more socialism, protectionism, isolationism or maybe all three. But don’t worry. If things get worse, the Fed will adopt negative interest rates.
Negative Side Effects
Central bankers aren’t the only ones to blame, but what are the consequences of their economic control and the move toward negative interest rates? In a special report, “Negative Rates Upend the World,” The Wall Street Journal chronicles some of them:
Penalizing banks. Through quantitative easing, you may recall, the Federal Reserve Board and other central bankers created trillions of dollars in cash that banks were allegedly going to lend out to stimulate the economy. Except banks prefer to make loans that will be paid back; many still remember that when they were lending to anyone with a pulse, the housing market imploded, causing the Great Recession.
So, in an effort to force banks to “stimulate the economy” by lending more, central banks are charging banks interest on the excess reserves they were forced by the central banks to hold. U.S. banks alone have excess reserves of $2.3 trillion, so there’s a lot of money at stake here.
Here’s the net effect of Keynesian logic—your mom or your grandparents, who depend on interest from their savings accounts to help fund their retirement, may soon be paying to keep their money in a bank, while the Fed is paid interest for money it’s made the banks hold as excess reserves (i.e., make a deposit, you pay; stick the banks with excess reserves, you get paid).
By charging banks, the idea is that they will lend the money out, which will (keep your fingers crossed) stimulate the economy. Except that if banks aren’t lending the money now, they likely have a good reason not to do so.
Apparently, central bankers think banks and investors aren’t taking nearly enough risks.
The Wall Street Journal notes that a one-percentage-point decline in rates could reduce earnings per share by 1% at Citigroup Inc., while a decline of just one-quarter of a point would lower earnings per share at Wells Fargo Corp. by 2%.
If negative rates increase costs for banks and lower their profits, won’t it drive them to tighten credit, rather than loosen it?
Penalizing bondholders. As of February, more than $7 trillion of government bonds worldwide offered yields below zero.
As Bloomberg noted, “That means investors buying bonds and holding to maturity won’t get all their money back.”
You bet your life. Financially responsible people purchase life insurance to provide their families with financial protection. Life insurers, in turn, make low-risk investments with the premiums they receive. They need to earn enough, though, to pay beneficiaries when their insureds die.
In Germany, regulators are forcing life insurers to boost capital levels just as low rates make it difficult for them to earn returns on their investments.
“German regulators are so concerned about the impact of negative interest rates on the country’s life insurers that they have said they can only be sure the sector is safe through 2018,” The Wall Street Journal reported.
So negative rates will cause banks to go out of business, bondholders to take losses and life insurers to become insolvent. That’s how central bankers and other Keynesians stimulate the economy.